The media continues to cover JC Penney’s grand flop of going to an everyday-low-price strategy with few sales and no coupons. (If you missed the news, JC Penney lost over $55 million since switching — the shoppers haven’t exactly responded the way the CEO expected, leading him to go so far as to compare coupon shoppers to drug users.) From MSNBC:
To oversimplify for a moment, here’s Penney’s problem. They told the world that retailers only offer their best prices during crazy sales, and Penney stores would no longer host them. Sensible consumers apparently took that information to heart and decided to simply wait for such sales at other stores. As an added benefit, Penney lowered consumers’ search costs, because they now knew they didn’t need to bother driving to a Penney’s store anymore.
…
All this price manipulation is really an information war, he says. Shoppers hunt for the tricks that let them save money. Stores hide booby traps that let them take money. It’s a bad system, one I’ve labeled “Gotcha Capitalism.” But it is the system we have now.
And it’s simply impossible, Gabaix argues, to be the one company that attempts to bridge this information gap. If a firm tries to educate consumers on tricks and traps, and tries to offer an honest product, a funny thing happens: Consumers say, “Thank you for the tips,” and go back to the tricky companies, where they exploit the new knowledge to get cheaper prices, leaving the “honest” firm in the dust.
“Once you educate consumers on the right way to shop, they will seek out the lowest cost store, and that will be the one with the shrouded prices,” he said. “Once they are savvier consumers, you make less money from them.”
One of my favorite comments under this MSNBC article reads, “If I buy a $60 shirt at Kohl’s that is 70% off minus my 30% coupon after my $10 Kohl’s money. I pay $2.60 for that shirt. Unless Penny’s is selling quality shirts for $2.00 I don’t see how I am being swindled by Kohls.”
Indeed.
stringofpearls says
and figured that Penney just does not have a good enough niche in the clothing industry for this type of marketing strategy. Of course I and all of my family members would go to Kohl’s instead for a $2 shirt. It’s called free markets (with the help of currency wars abroad, and stuff made cheaply in other countries…)! The only way you could get me into Penney’s with the higher prices (and without coupons) is if they could guarantee that their products were made in the USA. This is something I would definitely pay a little more for, because its something I believe in. Just a thought.
pam and family says
but the math is not correct…LOL. The Kohl’s cash awarded is calculated AFTER the discounts of 70% and 30% respectively. The total after those discounts is $12.60. She would not get $10 Kohls cash for that. She would essentially get another 20% of the $12.60, but only IF she also bought other items to add up to $50 after all discounts.
So, in the BEST case scenario, she is basically paying $10.08. And, that is only if she spends exactly $50 after all discounts, and only if she remembers to use the Kohl’s cash before it expires. (Still, a great price on a $60 shirt!)
So, in a way, she proved the point of the article…LOL. She WAS fooled by the shrouded prices.
Although, now that I think about it, maybe she is saying she already had Kohl’s cash from a previous purchase. That is somewhat tricky, too. Because I could say that I bought a package of $12.99 diapers for only $2.99 at Walgreen’s by using $10 in Register Rewards. So, therefore, I think diapers are cheaper there than at Wal-mart. That would also be incorrect, because I had to first buy something else at Walgreen’s to get that RR, so I would have to calculate that into the pricing scenario.
But, I still think Kohl’s has the better prices between the two stores, and only extremely RARELY shop at Penney’s. I am willing to jump through the hoops at places like Kohl’s because I understand HOW to do it, as probably most readers of Jill’s blog do. Not everyone else may understand as well.
tripletts07 says
I do not know about you guys but when I walked in there…I feel like I am in a family dollar store. I use to feel special going to JCP because it was a treat to go in there with a couple and get something for myself I normally would not buy. Nothing special there now and the prices are not that low. Sad.
ereml27 says
I wonder if Penny’s was trying to be like Aldi? Aldi has no sales – no high or low price cycles. And with its private labels, Aldi eliminated the ability to use a coupon. And yet, Aldi does a good business for itself in its niche market.
Susiem68 says
I used to know how to shop Penney’s. I could walk in and get the really marked down kids clothes and use my birthday rewards…usually $10 or $15 depending on what my charge card level was that year…and walk out with over $200 of clothes for $2.00-$3.00. No way you can do that now. On their Best price Friday you can occasionally get a good deal. I have found $2 formals, and $10 Sketchers, but the only days I would shop would be on those days. For regular shopping I will be going to Kohl’s! Now I have to learn that store and from what I understand get a card! Will wait until school clothes shopping though to get the card so I can cash in on that discount!